R&D tax credits are a tax relief designed to encourage greater R&D spending, leading in turn to greater investment in innovation. They work by either reducing a company’s liability to corporation tax or by making a payment to the company.
The HMRC’s research and development (R&D) tax credits statistics, published last week, contains good news for both innovative businesses, as well as the UK economy. The statistics are moving in the right direction, with claims and amounts of relief are up by 19%. The average claim value has increased for SMEs to £61,514. The total number of claims rose to 26,255, equating to £2.9 billion, an impressive increase.
Most of the claims, 21,865, fell under the SME scheme, with the remainder of claims under the large company schemes.
The ‘manufacturing’, ‘information & communication’ and ‘professional, scientific & technical’ sectors have the greatest volume of claims, with the ‘manufacturing’ sector having the highest amounts of claims, 7,210, with a total amount of £860 million and an average claim for the SME claims of £48,823 (Number of claims: 5,735/Amount claimed: £280 million).
Additionally, the ‘information & communication’ sector, is the second strongest, with 6,650 claims, £550 million recouped, with an average claim value for the SME claims of £65,199(Number of claims: 5,905/Amount claimed: £385 million).
Difference Between The Regions
R&D tax credit claims are concentrated in companies with a registered office in London and the South East, in terms of volume and value. Their commitment to innovation is shown by making the highest number of claims, where London companies account for 19% of all claims and 29% of the total tax relief claimed, whilst the South East accounted for 17% of claims and 20% of the total tax relief claimed. Looking at Wales, even taking into consideration that Welsh companies claims only represent a small part of the UK total, they have seen an exponential increase, of 86%.
A total of £2.9 billion was claimed in R&D tax credits by innovative UK companies during 2015-2016. Based on research carried out by HMRC, this £2.9 billion of relief may have stimulated up to £6.8 billion of additional R&D investment. Therefore, through HMRC’s R&D tax credits, and estimate £6.8 billion have contributed to the UK’s economy.
In a working paper, evaluation of research and development tax credit, HMRC assessed the impact of R&D tax credits on R&D investment in the UK. Their evaluation estimates that for every pound spent on R&D tax credits, stimulates between £1.53 and £2.35 in R&D spend by UK companies.
How Can SHENCOH Help With R&D Tax Credits?
Take the Eligibility Quiz to find out if you have qualifying R&D expenditure.
Shencoh is an R&D tax specialist company, with methodology and practices recognised by HMRC. We pride ourselves on not taking more than 3 hours of your time from start to completion, on a no win no fee basis. If you are interested in learning more or need help putting a claim in, please fill in the contact form here or give us a call on 0161 757 3657.